Viewing blog posts written by Gino DiCaro

Reshoring group outlines how we can compete for MFG

Dr. Harry Moser of the Reshoring Initiative recently outlined in IndustryWeek how California, and other states, have an opportunity to take advantage of the substantial reshoring surge across the United States, but how our competitveness internationally and locally play a significant role. He outlined some of the same issues we've heard anecdotally and in recent studies on California's competitiveness. Here are a few select comments:

• It is now clear that U.S. manufacturing, including foreign-owned plants, can be started up or grown to support a substantial flow of work back to the U.S.

• U.S. and foreign companies increasingly recognize that it is in their interest to supply more of the U.S. market by local production and sourcing.

• Based on timing of announcements, much of the surge was due to the anticipation of lower taxes and regulations and higher tariffs. To bring back more than about 10% of the five million offshored jobs will require more U.S. competitiveness, more leveling of the playing field—including some combination of lower USD, stronger skilled workforce training, still lower corporate tax rates, and a VAT (Value Added Tax).

• Bringing so many jobs from offshore disproves the weak claim that only 4 to 13% of the decline in manufacturing jobs has been due to offshoring, with the rest to automation. If so few had been lost to offshoring, so many could not be recovered in one year.

In addition to federal policy, states and cities need to play a role:

• Some states are more attractive and effective as destinations. The Southeast and Texas have dominated. The Midwest is now moving up in the rankings. Government incentives are the most frequently mentioned motivating factor

• Education and skills training need to be improved in almost all regions. Skilled workforce is the third ranked driver of reshoring and FDI.

• Infrastructure is highly ranked.

Companies can profit from the data below—here are some things to keep in mind:

• Skills training is a corporate responsibility. Some companies have taken that responsibility; others have ignored it. Without a larger and better trained workforce, the flow will decline rapidly. Skilled workforce is the third highest ranked motivator of reshoring.

• Industry 4.0. Automation, productivity, innovation and lean collectively are the highest ranked enablers of reshoring. Have you optimized?

In other but similar news, a study released in March by the Pacific Research Institute (PRI) revealed that we have a lot of work to do in some of the areas mentioned by Dr. Moser. The PRI report said California business executives, including those in clean tech, R&D, manufacturing, and other highly desired industries say the high costs of housing and real estate, a lack of highly skilled workers, and expensive costs of doing business are among the primary reasons why they are not locating or expanding in the Golden State.

The findings were based on 200 interviews with executives in R&D, IT, manufacturing, clean tech, and energy. Participants were asked their attitudes on California's business climate and the factors that went into their decisions about locating in California.

Key findings included:

88% said that "dealing with the high cost of housing and the high cost of commercial real estate would imapct our decision to locate in CA or not."

62.5% said that "improvements in the quality of education in California and the state's ability to provide employees with skills would affect our decision to locate in California"

71% said that "labor laws and regulations would play a factor in their location decisions." When specifically asked what two or three things would make California more attractive, the most common responses were "reducing taxes and bureacracy" and "Improving housing affordability and transportation infrastructure."

Next week the Champions of MFG blog will highlight the country's 2017 manufacturing investment growth and we'll take a look at how California came out in the race to attract manufacturing jobs.

With 3.6% CA MFG growth, lots of room for improvement

California continues to lag the country's manufacturing growth. While California grew its manufacturing jobs by 3.6 percent, the rest of the country picked up 8.6 percent since the end of the recession. Some big winner states include Kentucky at 20.5 percent, Indiana at 19.9 percent, South Carolina and Tennessee both at 16.5 percent, Colorado at 15.4 percent, and Ohio at 12.0 percent. California must keep up the drumbeat of policies to atttract new manufacturing investment.